The purpose of this paper is to investigate whether the effectiveness of aid has increased over time, in the light of the contention by Boone (199,. 1996), Dollar and Burnside (1997) and the World Bank (1998) on the issue of the extent to which the impact of aid on investment and growth is insignificantly different from zero abstracting from policy variables. The results indicate that there was a significant linkage between aid and growth over the period 1981-95, when effectiveness seems to have improved. This evidence is robust with respect to reasonable variations in sample size, estimation procedure and variables specification. Similar results are obtained for investment despite the fact that aid tends to increase consumption and weaken savings. Our interpretation of this apparent improvement is based on three factors: an increased allocation of aid to "human capital-increasing functions", a reduced scope for "fungibility" and the increased effectiveness of political dialogue in certain areas, namely with regard to exchange rates, public investment and real interest rates.